Jones wanted 400,000 pounds ($630,000) to buy a small hotel in North Wales and Royal Bank of Scotland said he could have the money if he also took out a swap - a form of insurance designed to protect him from a rise in interest rates.

Like a growing number of small business owners in Britain, Jones now regrets signing up. His hotel was repossessed in July last year after a sharp drop in rates during the financial crisis pushed charges on the deal to an unaffordable 30,000 pounds a year, the same as the repayments on his loan.

"I've lost my house, my wife and I have separated, I lost my self respect and I lost the respect of my local community because they don't see what's going on in the background. People just assume that you've done something wrong," Jones said.

The 48-year-old is caught up in what could become the UK banking industry's next big scandal. An increasing number of firms that bought the disputed insurance products are claiming compensation and their advisers say the bill could run into billions of pounds. UK banks already face paying 8.8 billion pounds in compensation for disputes over other insurance.